Considerations When Using a Life Estate As Part of Your Estate Plan

DuPage County estate planning attorney, life estate, your estate plan, estate planning goals, Illinois estate planningEstate planning often involves the balancing of the needs of several family members and friends, and a desire to make sure that they are provided for after the planner’s death. For example, a man may wish to leave his property to his grandchildren, yet also wants to ensure his sister has a place to live until her death. In order to execute this kind of arrangement, the man may wish to leave his sister a life estate in the property, with full ownership vesting in the grandchildren after the sister’s death.

A life estate presents a way for an owner to pass an ownership interest in real property to another person for the duration of that person’s life. At the life estate holder’s death, the interest passes back to the original owner or to another designated person. The person who receives the real property after the life estate is terminated is known as a remainderman.

The life estate holder does not have all the rights that a person would have if he or she owned the property outright. For example, the life estate holder cannot sell the property without the permission of the remainderman. However, if the legal document that grants the life estate has no limitations on transfer, the life estate holder can sell the life estate interest or lease it for the duration of his or her lifetime.

The life estate holder is required to make ordinary repairs to the property, avoid neglecting, wasting, or negatively altering the property, and generally take steps to avoid damaging the value of the property. The life estate holder may also be required to pay taxes on the property and other costs associated with upkeep of the property.

Because of these added expenses, the grantor of the life estate should consider whether granting the life estate will present more of a burden to the beneficiary than a gift. If the life estate holder is also receiving a monthly upkeep from a trust, this may not be a major concern.

A landowner can also grant himself or herself a life estate in his or her property with the remainder estate passing to a family member or friend upon the owner’s death. However, these kinds of transfers can affect the owner’s eligibility for government benefits such as Medicaid, and have negative tax consequences for the owner if there is a sale of the property.

Contact Us for Legal Assistance

If you are considering an estate plan that includes the grant of a life estate, you should speak to an experienced DuPage County estate planning attorney for more information. There may be other ways to distribute your assets that are more advantageous than the use of the life estate, and still achieve your desired estate planning goal. Contact Momkus McCluskey LLC for a consultation today.

Sources:

https://scholar.google.com/scholar_case?case=2072256002459558706&q=life+estate&hl=en&as_sdt=4,14

http://www.dhs.state.il.us/page.aspx?Item=14932

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